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Japan and EU on course for historic trade deal

The EU and Japan have formally agreed an outline free-trade deal. The agreement paves the way for trading in goods without tariff barriers between two of the world's biggest economic areas.

However, a workable agreement may take some time and so it is likely to come into effect after Britain has left the single customs union. Both sides have become keener to push through a deal since Donald Trump came into the presidency in the USA, signalling a more protectionist stance from one of both economies’ strongest partners to date.

A political agreement

EU trade commissioner Cecilia Malmström announced that a ‘political agreement’ had been made with Fumio Kishida, Japan’s foreign minister. The pair exchanged Duruma dolls with eyes made with the Japan and EU flags – a symbolic gesture in reference to a part of Zen Buddhist culture.

“We ironed out the few remaining differences in the EU-Japan trade negotiations,” she tweeted. “We now recommend to leaders to confirm this at summit.”

What we know about the deal so far

It is understood that the deal will include lowered tariffs on many European imports into Japan such as chocolate, pasta and cheeses. Japan is likely to open up its highly protected dairy market while Europe is likely to agree to lower tariffs for Japanese car imports.

Trade deals take time

While the signs are certainly encouraging for a deal being finalised, trade deals are notoriously cumbersome to push over the line. There are still disagreements over the investor-state dispute settlement system, for example, and the EU has declined to say how quickly the deal could come into force.

With the final text of the trade deal between the EU and Canada, the deal took three years following a similar political agreement as has been made with Japan. The deal almost collapsed when a Belgian region threatened to veto the whole treaty and the deal still requires final ratification from at least 38 EU national and regional assemblies.

Donald Tusk and Jean-Claude Junker, presidents of the European council and commission, are to meet Japanese PM Shinz>ō Abe at a one-day summit in Brussels before the G20 gathering in Hamburg. The timing of today’s announcement is seen as a consequence of Germany’s desire to make free trade a summit priority.

The UK set to miss out

The UK was a passionate advocate for the EU-Japan deal when negotiations began in 2013 but it is likely that a deal will come into force after the UK has left the EU and also the single customs union.

Theresa May announced that leaving the single market would be a key aspect of the UK’s exit from the EU, during a speech at Lancaster House earlier this year. Since then, a bruising election has led many to believe that the UK government will soften their stance on the single market, but no announcements have been made on this front.